There Is No Economic Consensus on Obama's Policies

Yet the president insists "every economist" is pro-stimulus and in favor of the raising minimum wage.

Since its inception, the Obama administration has engaged in the deceptive routine of claiming that "economists," "every economist" or a "consensus" among economists is in lockstep agreement over whatever policy prescription the White House happens to be peddling at the moment.

It began with the stimulus, when President Barack Obama misleadingly asserted that "economists from across the political spectrum agree that if we don't act swiftly and boldly, we could see a much deeper economic downturn that could lead to double-digit unemployment and the American dream slipping further and further out of reach." Swiftly and boldly, perhaps, but not in the same way. The Cato Institute found 200 economists, three of them Nobel laureates—James Buchanan, Edward Prescott and Vernon Smith—who disagreed that all economists supported the president's stimulus plan.

Then there's Nobel laureate Thomas J. Sargent, who in 2010 took the White House to task for its incorrect assertions about economists' views of the stimulus bill's likely effects: "President Obama should have been told that there are respectable reasons for doubting that fiscal stimulus packages promote prosperity and (told) that there are serious economic researchers who remain unconvinced."

And after the stimulus failed to come close to achieving the rosy predictions set by the president's own Council of Economic Advisers, Obama attacked critics, ratcheting up the rhetoric to claim that "every economist"—yes, every—"from the left and the right, has said, because of the Recovery Act, what we've started to see is at least a couple of million jobs that have either been created or would have been lost."

Obama's chief economist Jason Furman wrote on his blog this week that the stimulus saved or created an average of 1.6 million jobs a year through the end of 2012. That piece of, um, data, like many contentions made by economists with an agenda, is nearly impossible to prove or disprove—and it should be nearly impossible to believe, because it comes from a White House shop that trumpeted pie-in-the-sky forecasts about recovery to begin with.

White House

This week, the Democrats' big push for a minimum wage hike hit a bit of a speed bump when the Congressional Budget Office (CBO) estimated that if a $10.10 wage were implemented in the second half of 2016, we would see a reduction in employment of anywhere from 500,000 to 1 million workers. Further, only 19 percent of the $31 billion in wage increases would accrue to families with earnings below the poverty threshold. Naturally, Furman, who has used CBO numbers to bolster arguments over the years, told reporters that this time around the numbers are completely wrong. The report "does not reflect the overall consensus view of economists, who have said that the minimum wage would have little or no impact on employment," he said.

Consensus view of economists? Is that true? For many years, the the broad consensus said that raising the cost of hiring low-skilled workers would mean fewer jobs. Economist and columnist Thomas Sowell put it like this: "One of the simplest and most fundamental economic principles is that people tend to buy more when the price is lower and less when the price is higher. Yet advocates of minimum wage laws seem to think that the government can raise the price of labor without reducing the amount of labor that will be hired."

This seems to be the most basic of basic economics. Yet in the past decade, there have been competing studies claiming to show an array of results. Democrats will most often refer you to a letter from the left-wing, union-funded Economic Policy Institute that's signed by 600 economists who support the wage hike. How many of those findings are driven by partisan and ideological concerns rather than empirical outcomes? I'll let the social scientists argue over it.

But when the Initiative on Global Markets at the University of Chicago's Booth School of Business queried a panel of 38 top economic experts on the subject of the minimum wage and low-skill employment not long ago, the results suggested anything but a consensus. They were presented with this statement: "Raising the federal minimum wage to $9 per hour would make it noticeably harder for low-skilled workers to find employment." Thirty-four percent agreed, and 32 percent disagreed; 24 percent were uncertain.

So the minimum wage debate splits economists in many ways these days, but what it doesn't do is offer us any consensus that asserts Obama is right. It never does.

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I don’t think this is intentional. I think it reflects intellectual insularity amoung Obama and his top advisors.

Progressives, in general, are extremely insular. They are entirely convinced that they, and they alone know the truth and that everyone who disagrees is in the pay of some sinister corporation or evil billionaire. They don’t honestly engage opposing ideas, they just shut them out, and because they shut them out and surround themselves with like-minded people they become convinced that “everyone” thinks the same way they do. The occasional intrusion of some differing opinion is treated as automatically suspect. Only crazy people and Repupublicans (same thing) think X so therefore if you think X, you must be a crazy person or a Republicans, so therefore we should ignore you.

There’s an uncanny resemblance between academic lefties and fundamentalists that’s hard to miss if you’ve spent much time with either. The main difference being that the academic left has developed a convoluted method of convincing themselves that they aren’t insular, which is how you have progressives patting themselves on the back for their love of diversity one moment while calling libertarians reactionaries and neoconfederates the next, whereas fundies have never bothered to rationalize their beliefs beyond the level of “God wills it.”

I remember the first time I heard the name I thought it sounded like a junior high boy was polled for mean sounding names. Now I just sort of wonder if they get all their policy ideas from junior high boys. “Yeah, minimum wage sounds mean…let’s make it the law that everyone has to make a million dollars a day!”

I don’t think this is intentional. I think it reflects intellectual insularity amoung Obama and his top advisors.

With all due respect, they don’t deserve any benefit of doubt. Were we talking about some religious fundamentalists who lack the resources to travel outside their immediate intellectual boundaries, your assumption of non-intention might fit. But not for academics.

Their intellectual island is of their own making. They have near infinite access to contrary thought and a professional and academic responsibility to take contrary ideas into account. Yet they choose to surround themselves with like-minded stooges and to ignore the seemingly un-ignorable and popular ideas that contradict their own. They are, as you say, insular, but it is intentional.

They are just bipedal hominids like the rest of us, though, and everyone but the neurotic has an extraordinary capacity for ego reinforcement and self-deception. That’s how statists can still convince themselves that they have the moral high ground even while they’re advocating state violence/laws on behalf of any pet cause.

It’s in the human psyche to find reinforcement for inherited beliefs, and the progressive doctrine of aggression in the name of democracy is dug in well enough that it’s going to take a long time for free markets to destroy. Though with enough wealth and technology, it may just wither and die like the outmoded religious sect it is.

I agree, but wadair is also right that our elected officials–of all political stripes–have a duty to look beyond their own biases in search of the most effective, efficient policies. Not just according to “expert opinion,” but according to what has been proven to work in the real world. (Or, in the absence of such evidence, to genuinely consider and debate–before acting–the merits of all policy recommendations.)

That makes their “mistakes” much more serious than those of the average civilian.

Obama’s chief economist Jason Furman wrote on his blog this week that the stimulus saved or created an average of 1.6 million jobs a year through the end of 2012. That piece of, um, data, like many contentions made by economists with an agenda, is nearly impossible to prove or disprove?and it should be nearly impossible to believe, because it comes from a White House shop that trumpeted pie-in-the-sky forecasts about recovery to begin with.

“It’s not even wrong” comes to mind. If economists want the numerical certainty of the hard sciences (or even the softer ones like psychology), they’re going to have to start employing the scientific method someway, somehow. Until then, the numerical barrage of econometrics and statistical meta-studies is nothing but covering fire.

Yet advocates of minimum wage laws seem to think that the government can raise the price of labor without reducing the amount of labor that will be hired.

And now Krugman will dedicate a column to explaining why Sowell doesn’t understand statistics or the importance of dummy variables in designing econometric meta-analyses of the effects of minimum wage on unemployment. The hand waving will be astonishing.

The more I read about post-Keynes economics, the more chimerical the whole discipline becomes. The work may be laborious and challenging, but the same could’ve been said for soothsayers and astrologers a few generations ago.

The issue is one of humility. Economics is complicated, the future is difficult to predict, and the impact of a particular policy is difficult to measure with precision because you can’t isolate variables. However, the humble economist realizes these limits. Krugman and company are many things, but humble ain’t one of them.

Not difficult, impossible. Quantitative precision implies a standard of measurement. Prediction assumes invariance at some fundamental level. The object of economic study, the purposeful behavior of human beings whose values are incommensurable and whose choices interfere with any deterministic pattern, cannot be the subject of any such analysis. The attempt to do this was mere folly before subjectivism and praxeology. 100 years on, it is indeed hubris, thanks in no small measure to Milton Friedman.

Not sure I understand your second point: Predictable variance will suffice for what? Prediction?

My point (perhaps worded poorly) was that prediction cannot occur in the absence of deterministic, uniform observable events. I would be hard pressed to find counter examples to that because it seems definitive. Perhaps you can help.

I don’t think he’s disagreeing with your sentiment, just the precision of your wording. Variance is allowed even in deterministic processes. The ability to reject the null hypothesis to a sufficient level is what really matters.

Or that just may be the Black Bush talking (gotta save the 16yr stuff).

“Variance is allowed even in deterministic processes.” Thank you. I don’t need to predict to the dollar or Euro the result of M/W increases, what I need to predict is the change in positive or negative values and predict the range in which those values will fall. Even in engineering, I can’t predict the specific failure of a structural element as a part of a system. I can predict the system will fail in X, +/-Y as a result of the design of that part.

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I think every discussion of the minimum wage should include the embarrassing facts about its origin in Progressive thought. People think it was just to improve the lot of the poor. No, it was to improve the lot of some poor: white men. It was part of the goal of a minimum wage to disemploy white women (so they would stay home and have babies), black men (so they wouldn’t be able to afford children) and the disabled (ditto). The minimum wage is racist, sexist eugenics.

I have brought this up before and one response was that this was merely history. But if someone invented a medicine 100 years ago to remove hair, is it not relevant when the same medicine is now promoted as curing baldness?

You cannot “easily prove” the stupidity of the minimum wage to the average person, and certainly not to leftists. However, being obsessed with racism and sexism, the racist and sexist argument should give them pause.

Well, some things really are racist and sexist. Unfortunately those terms have been devalued from overuse. But this is not false charges of racism and sexism (i.e. playing the left’s default rhetorical game), but an historic reminder of the roots of the policy itself, which deftly undercuts the argument about the wonderful goodness of the minimum wage. I think it’s just as valid and important as bringing up the fact that many gun control laws were specifically aimed at disarming blacks.

No, it is not pointless. A large part of progressive thought is based on the assumption that women and minorities are inferior. Only now it’s hidden in layers of elaborate verbiage about misogyny and inherent racism. New to the forum, hello all.

It’s time to quite pretending that these Keynesian sycophants are economists at all. What they are is court astrologers, using a burlesque of mathematics to help tyrants pretend that their ham-fisted interventions in the economy are carefully considered and benevolent.

They don’t even do a very good job os using mathematics. The majority of their supposedly rigorous analyses consists of conveniently omitting data. Better off killing a fucking goat and seeing what its last meal was.

This is why Sharon Pressley told Reason that libertarianism isn’t going anywhere until we stop talking about theory (preaching to the choir) and start talking in terms that people can understand.

Example: Forcing wages 1/3 higher will likely require price increases. At higher prices, less “stuff” can be bought. So fewer people are employed to provide that “stuff.” Any questions?

Optional

Yes, higher wages to McDonald’s workers will allow them to buy more stuff … but unless that stuff is more McDonald’s burgers and fries, then other McDonald’s workers will be laid off. The greatest victims overall will be … wait for it… young black males.

If Obama had a son, he’d look like all the young black males whose futures Obama is a threat to.

Michael Hihn|2.21.14 @ 10:36PM|# “This is why Sharon Pressley told Reason that libertarianism isn’t going anywhere until we stop talking about theory (preaching to the choir) and start talking in terms that people can understand. Example: Forcing wages 1/3 higher will likely require price increases. At higher prices, less “stuff” can be bought. So fewer people are employed to provide that “stuff.” Any questions?”

I agree with Sharon, but your example ain’t going anywhere. Like it or not, there is a relatively common ignorant assumption that companies are rich and they can afford to (a)pay more, or (b)charge less. Your example presumes some competence at finance which isn’t evident.

Like I said, “we” have been total failures at selling and defending liberty. Do we blame students for incompetent teachers?

One example: Polls show that most Americans believe the rich don’t pay their share of taxes.

1) The rich subsidize 35% of the entire core middle class ($40-100k) share of the personal income tax. Why do we allow Americans to believe otherwise?

2) 85% of the Bush tax cuts went to gross incomes UNDER $250,000 … who paid only 45% of the personal income tax … the greatest wealth redistribution since FDR! Why do we allow Americans to believe otherwise.

3) President Obama has repeatedly stated that a $50,000 secretary pays a higher average tax rate (at 8%) than millionaires and billionaires (at 23%). Why did we fail to challenge Obama’s falsehood?

4) If we compare the uninsured rate between (a) the private health insurance markets and (b) (pre-Obamacare) Medicaid … Medicaid has a HIGHER percentage uninsured (at 18.8%) than the private market (at 16.3%). Why do we allow Americans to believe the exact opposite?

5) 1/4 of our uninsured, 12 million people, are eligible for Medicaid and CHIP but have not enrolled. Many doctors cannot afford treat them for as little as $17 per visit. Why are we not shouting this simple fact from the rooftops?

As a twice-elected libertarian who led a successful local tax revolt, I’ve never suffered that handicap.

Shocking as this may seem at first blush, a lot of people dislike paying taxes. If you’re as good as you say you are at convincing the vast majority of people who favor the minimum wage to abandon their viewpoint, maybe you should spend more time winning elections instead of trying to swing your e-dick in a comment on the fucking internet.

PM, I have to hand it to you. You are quite consistent in your nihilism. You never lets a novel point of view go untouched without a mindless smear.

Mr. Hihn, in person, I picture PM as a fairly insecure and shy who is probably half-way decent if you take the time to talk to him and bring him out of his shell. Anyway that’s how I picture him so I do not let his antics piss me off too much. Just a suggestion.

Come on Servo. Mr. Hihn is a bit smug and pompous, but he is right. The economic arguments need to be made even if many refuse to listen. Yeah he was a little peevish about your misuse of the term finance instead of economics, but maybe save the asshole term? What do you call true assholes like Hillary, most US Senators and recent presidents if you use it on the likes of a presumably innocent poster like Hihn?

Feed the ‘stimulus’ through any decent macro model of an economy (ie Ramsey, Solow, Tobin or Sidrowski) and you get what we saw- stagnation and low growth.

The /illusion/ of an multiplier effect from government spending comes from Keynes, who did not separate real and nominal effects, and wrongfully concluded that purely inflationary spending effects were actually real growth.

Additional government spending will NEVER ‘stimulate’ the economy, it simply can’t. More spending means more taxes (either immediately or deferred but with accrued interest, the market takes those expected higher future taxes into consideration immediately and you have immediate effects), and taxes have a large negative impact on the economy via the Excess Burden of Taxation (long subject, see the Wikipedia article).

In the US today the marginal Excess Burden is about 75%. So to put an additional $1 in government’s pocket requires that $1.75 be taken from everyone else. That 75c government does not get is simply lost to the economy as output that would have taken place but now does not.

A spending program that will ‘save or create 4 jobs’? It will destroy 7 jobs to pay for it.

Shawn Wilson, I’m no economist. And neither are you. But I know what the Keynesian “multiplier effect” is.

The government pays you a million dollars to dig a hole in your backyard. Every penny of government spending increases GDP. Now assume you “consume” 20% of your income. GDP increases by 120% of your government wage — a “multiplier effect” of 1.2.

Now assume GM pays you the exact same amount, for the exact same reason, and you consume the same 20%. Private wages do not increase GDP, only your consumption does. So GDP increases by only the 20% of your wages which becomes consumption, for a “multiplier effect” of 0.2 — which has nothing to do with what “Excess Burden.”

It’s a simple matter of double counting, which will ALWAYS favor government spending, and can be explained to even today’s average high school graduate.

I have a very skewed perspective on what I’m about to say… because I’m an engineer, but anyway…

Engineers are (typically) trained to problem solve. This involves things like using physcial LAWS (not made up laws from economist “George blowhard”) and identifying actual causation. Try publishing a paper in an engineering Journal, without being able to prove the physics you have no chance. Krugman would be a very very poor engineer.

Most economists I talk to do nothing but spew quotes from famous economists. Well “blowhard” said in 1947 that your reasoning sucks because…. Why do we not train economists, who deal with numbers and statistics to problem solve, think for themselves, and use the damn data they are working with anyway? In my opinion, modern economics degrees are (mostly) bullshit. Make these clowns get an engineering degree first.

Ah, how cute, the engineer thinks economics is as simple and straightforward as engineering…

Economists have tons of laws, all every bit as solid as yours. They don’t cover everything though. And everything we deal with is really the sum of myriad contributing forces, forces whose intensity and importance are not fixed and can change with time. This is not to mention people and their constantly changing motivations.

‘Krugman would be a poor engineer’? Hell, he’s a piss poor ECONOMIST…

Don’t mistake the qualities of the economists you see on TV or working for government for the real thing. We aren’t like them. We DON’T like them…

“And everything we deal with is really the sum of myriad contributing forces, forces whose intensity and importance are not fixed and can change with time. This is not to mention people and their constantly changing motivations.”

I wish this thread wasn’t dead, because I wholeheartedly agree with this. It’s precisely why I think most economics degrees are BS.

“how many of these findings are driven by ideological and political concerns…”

you mean like when a “libertarian” columnist, who gets paid through donations from right-wing foundations, tells us how terrible it is that a company has to pay its workers $420/wk.

you mean conservative and libertarian politicians haven’t made definitive arguments that raising the min. wage is going to slow job growth when no such consensus exists? that’s not the argument i’ve been hearing from saint rand paul.

Asshole, how long are you going to claim triumph for your stupidity posting to dead threads? It’s obvious you are lacking the intelligence of the average pet dog, but proving it by hiding in the shadows only makes it more obvious. Oh, and please tell us how you excuse the millions of murders resulting from your fave dictators. Oh, and fuck you with a rusty shovel.

Sevo: Asshole, how long are you going to claim triumph for your stupidity posting to dead threads

Like you just did? (lol)

Compare my response to him/her. Now pay attention. I’ll go slowly.

In such open discussions, your target audience is not your opponent, but any neutral observers. That could be here, the employee lunch room, a meeting in your community, wherever. It’s called “persuasion” — the only way to increase supporters in a free society.

So who will be more persuasive to neutral observers, you or american socialist? And which is the larger threat to individual liberty, them or you?

I wrote this for any neutral observers. If there are none to persuade today, I’ll find one or more tomorrow. Or the next day. I’ve been doing it for over 50 years as a libertarian. How many will YOU persuade?

Force wages to increase by 1/3 at McDonalds. This causes higher prices. At higher prices, less stuff can be provided, which requires fewer workers, so McDonalds loses jobs.

The Keynesian disagrees. Let’s call that bullshit. He says the workers with higher wages have more to spend, which creates jobs. He ignores the jobs that had to be destroyed first.

Google for (Bastiat “broken window fallacy”) with quotes as shown.

Back to McDonalds. Unless those workers spend their higher wages on stuff at McDonalds, then McDonalds loses sales and does lay off workers.

Now the part Keynesians miss. Low-wage jobs are destroyed to create higher-wage jobs elsewhere. But those jobs are FEWER than the jobs destroyed, ummm, for the same reason higher prices reduced sales for McDonalds.

Now do the math. Minimum wage increases, if mandated by law, throw the least-skilled under a bus, to create higher wage jobs elsewhere in the economy.

Did you do the math? It’s IMPOSSIBLE for those new jobs to be created, unless we first DESTROY the lowest-wage jobs. In this case, Obama would destroy jobs and opportunity for … young black males. What a guy.

Libertarian economics buffs and Austrian economists study how markets work in order to understand the effects and plot it’s patterns. Keynesians and government bureaucrats claim that they can control outcomes and need only be granted the power to steer the econmy and “we’ll” all be fine. Libertarians know that you can’t control outcomes and that there are always I intended consequences. You simply don’t understand that the “socialists” at the top are still capitalists and that they are flawed because they are human. The lust for power and control can only reach it’s worst outcomes when it controls large numbers. Just look at the United States. It’s much, much more a socialist economy than it is a free-market one. Do you like the results?

I assume you mean Coolidge vs FDR? Where FDR took office when the Depression was already over.

There were actually two recessions, Jan 1920 and May 1923, and Coolidge took office in 1923(when Harding died, then elected in 1924). The double-dip is similar to what Reagan inherited. The first recessions were over (1920 and 1980) but only technically.

Coolidge and Reagan offer interesting parallels. Both used tax cuts and proposed large spending cuts, but Reagan’s spending cuts were buried in a Republican Senate — and he began arguing for a Line-Item Veto, over his own party!

The only peacetime economic booms in nearly 100 years were under Coolidge, Kennedy and Reagan — all three with large tax cuts. (Clinton took office in the 22nd month of a recovery and left a recession)

“The Cato Institute found 200 economists, three of them Nobel laureates?James Buchanan, Edward Prescott and Vernon Smith” … “How many of those findings are driven by partisan and ideological concerns rather than empirical outcomes?”

That second quote is of course from later in the article about the EPI’s 600 economists. I juxtaposed the two quotes because I think it’s disingenuous to take Cato’s 200 economists at face value while dismissing EPI’s 600 economists (which btw include 7 Nobel Prize winners).